Analysis: Economic recovery - a sprint that became a painful marathon

 

Economics Editor

"We've always said the road to recovery would be a marathon, not a sprint" said the Business Secretary Vince Cable today in response to the GDP figures. Talk about rewriting history.

When George Osborne unveiled his first Budget in June 2010 (when the Chancellor proudly ratcheted up the cuts and tax rises inherited from the previous government) the forecasts from the Treasury's Office for Budget Responsibility (OBR) were for the economy to grow this year by 2.8 per cent. That's a sprint in anyone's book.

Now the OBR is projecting growth this year of just 0.6 per cent. This is the context in which to regard yesterday's slightly better than expected first quarter growth figures for the 2013 and the fact that we have managed to avoid a triple dip recession. We are still in the grip of the longest downturn since the 1920s. Employment has held up well given the weakness of output, but living standards are falling as pay is outstripped by inflation. Our economy is still 2.6 per cent smaller than it was in early 2008.

It wasn't supposed to be like this. This wasn't supposed to be a marathon. So whose fault is it? The eurozone crisis hasn't helped. Nor have spikes in the global oil price, which have pushed up prices. But the Coalition's capital spending cuts and the VAT rise George Osborne pushed through back in 2010 have also inhibited growth.

Back in 2010 the Chancellor was advised to build some flexibility built into his programme in case things didn't work out as well as the rosy forecasts projected. He rejected this advice and said that he - and the country didn't need an insurance policy. Why? Because George Osborne was confident we'd be sprinting by now.

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